Kenneth Rijock

Sunday, September 7, 2014

CONSTRUCTION FRAUDSTERS LAUNDERED CHECKS THROUGH MONEY SERVICE BUSINESS

Recent arrests in Florida, for insurance fraud and money laundering, exposed a sordid side of the state's lucrative construction industry, which required the cooperation of a check cashing company, to evade the state's requirement that sub-contractors carry valid Worker's Compensation insurance on all their jobs.

Here's how it was set up:

(1) The fraudsters, who wanted to assist sub-contractors seeking to avoid paying Worker's Compensation insurance premiums, set up shell companies.

(2) The shell companies purchased minimal insurance, claiming that they employed small work crews for construction jobs. In truth and in fact, the shell was not operating as a sub-contractor anywhere.

(3) The sub-contractors would use the certificates of insurance from the shell, claiming that they were the shell company, rather than their true corporate identities. They paid fees to the fraudsters, but saved large sums, by not buying mandatory insurance coverage.

(4) When payment was made for the jobs, in the name of the shell company, the fraudsters would cash the checks at a cooperating liquor store that also functioned as a money service business, pay the MSB for its illicit assistance, and pay a portion of the money to the sub-contractor in cash.

(5) The sub-contractor would then pay its employees in cash.

(6) The scheme, which came to light when the attorney for an injured employee of a sub-contractor sought to recover medical costs, and lost wages, for his client's on-the-job injuries, discovered the existence of the shell companies. Investigators discovered that the sub-contractors, who had received millions of dollars, had no employees reporting income.

A number of the participants in the fraud have received prison time, and ordered to pay restitution. The owners of the MSB were placed on probation, and ordered to pay restitution. One of the fraudsters has fled the country, probably to Latin America.

State of Florida regulators are awaiting the arrival, reportedly within the next six months, of a real-time database, which will allow investigators to see, and track, check-cashing businesses, which will show when businesses cash checks, instead of depositing them in their corporate accounts.